Gold jumps after US Fed signals rate-hike pause imminent

March 22 (Reuters) – Gold prices climbed on Wednesday after the US Federal Reserve toned down its aggressive approach to reining in inflation in a widely anticipated policy statement and indicated that an end to interest rate hikes was on the horizon.

Spot gold was up 1.7% at USD 1,973.52 per ounce by 3:56 p.m. EDT (1956 GMT), after advancing as much as 2%. US gold futures settled 0.4% higher at USD 1,949.60 before the Fed announcement.

The Fed raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets.

But in the press conference that followed, Fed Chair Jerome Powell said the central bank was not expecting to cut rates in 2023.

“The Fed is having to balance inflation risks and economic stability, both are factors that could drive further safe-haven demand for gold,” Standard Chartered analyst Suki Cooper said.

Gold has climbed over 7% so far this month, closing in on record highs above USD 2,000 hit in March 2020, on concerns surrounding the banking and financial industry, mainly triggered by higher rates.

“While off its intraday highs, gold is ‘sticking a fork’ in the Fed’s turkey and rallying strongly, betting that this rate-hike cycle is done,” said Tai Wong, an independent metals trader based in New York.

“The hurdle for another hike is substantial with the Fed explicitly watching the tightening of financial conditions and the question though is whether gold can break above last week’s highs with short-term rates at 5%.”

Gold is often sought as a safe store of value during financial instability, and benefits from lower rates as it yields no interest.

US Treasury yields dropped, and the dollar touched its lowest in nearly seven weeks, making precious metals more attractive.

Silver gained 2.6% at USD 22.97 per ounce, platinum added 1.5% at USD 982.86 and palladium advanced 3.6% to USD 1,438.45.

(Reporting by Seher Dareen and Bharat Govind Gautam in Bengaluru; Editing by Shilpi Majumdar)

Sterling rises as inflation data turns heat up on BoE

LONDON, March 22 (Reuters) – Sterling jumped on Wednesday after data showed UK price pressures picked up a lot more than expected in February, including inflation that excludes food and energy, raising the chances of another rate rise this week from the Bank of England.

British consumer price inflation (CPI) unexpectedly rose to 10.4% in February from January’s 10.1%, figures from the Office for National Statistics showed on Wednesday.

Economists polled by Reuters had forecast the annual CPI rate would drop to 9.9% in February.

The pound was last up 0.3% against the dollar at USD 1.225, from a 0.1% gain prior to the data. The euro fell 0.3% against the pound to 87.86 pence, from 88.00 pence earlier.

“Big unexpected jump in UK inflation this morning, breaking a three-month stretch of prior declines. This is a real problem for the Bank of England, which will need to stay the course on further rate rises, increasing the probability of recession later in the year,” John Leiper, chief investment officer at Titan Asset Management, said.

Money markets show a 61.6% chance the Bank of England (BoE) will raise rates by a quarter point when it meets on Thursday, up from around 57% on Tuesday.

The core CPI, which excludes energy, food, alcohol and tobacco and is watched closed by the BoE, rose to 6.2% from 5.8% in January, versus a forecast decline to 5.7%.

The annual inflation rate in the services sector, which most policymakers consider a good measure of underlying price pressures, rose to 6.6% from 6.0% in January.

The pound has risen by 2% against the dollar so far in March, partly reversing some of February’s 2.43% drop. But it’s struggling to make much headway, given traders widely expect the BoE to make this week’s rate decision the last hike for now.

At over 10%, the rate of inflation is more than five times the BoE’s target rate of 2% and the highest among the Group of Seven richest nations.

“One other thing that we also know about inflation in the UK is that it goes up quickly and comes down slowly, and with wage inflation also rising it is likely to remain sticky,” CMC Markets strategist Michael Hewson said.

(Reporting by Amanda Cooper; Editing by Joice Alves and Mark Potter)

Euro zone short-dated yields jump as fears of banking crisis fade

March 22 (Reuters) – Euro zone government bond yields rose on Wednesday as fears of a banking crisis receded and ECB hawks called for more rate hikes.

Markets are awaiting the outcome of the Federal Reserve’s Federal Open Market Committee (FOMC) at 1800 GMT.

Eurozone policy-setters must be “stubborn” and continue increasing borrowing costs to battle inflation, Bundesbank chief Joachim Nagel said.

US Treasury Secretary Janet Yellen told bankers on Tuesday that she is prepared to intervene to protect depositors in smaller U.S. banks suffering deposit runs.

Germany’s 2-year government bond yield, the most sensitive to changes in expectations for interest rates, rose as much as 13.1 bps and was last up 12 basis points (bps) at 2.7%.

(Reporting by Stefano Rebaudo; Editing by Amanda Cooper)

Jittery markets attempt risk-on rally while waiting for Powell

With about 12 hours still to go before the Fed announces its policy decision, investors are attempting a bit of a risk-on rally.

Comments from US Treasury Secretary Janet Yellen, who told bankers that she was prepared to intervene to protect depositors in smaller banks, have helped calm some of the market’s nerves, even as a scramble by embattled US lender First Republic Bank to secure a capital infusion kept worries about the sector alive.

The collapse of Silicon Valley Bank, which sank under the weight of bond-related losses due to surging interest rates, kicked off a tumultuous 10 days for banks, with fears of a global meltdown rattling investors.

And that brings us to the main event of the day: the Fed’s policy meeting, which concludes on Wednesday with the 2 p.m. EDT (1800 GMT) release of a policy statement followed half an hour later by a news conference by Chair Jerome Powell.

Traders are pricing in an 85% chance of a 25 basis-point interest rate hike by the Fed and a 15% chance of no increase. Just a month earlier, the market was pricing in a 24% chance of a 50 basis-point hike.

The past two weeks have upended expectations, with market funding conditions tightening sharply since the collapse of Silicon Valley Bank and a rout in Credit Suisse shares that led to a shotgun takeover on Sunday by Swiss rival UBS.

Whether that’s enough for central banks to stop hiking remains to be seen.

The MSCI ex-Japan index rose 1.3%, while the dollar and gold traded in narrow ranges. Futures indicated European stocks would likely join in on the rally.

In the corporate world, GameStop posted a surprise profit for the fourth quarter, its first since early 2021, sending the “meme stock” nearly 50% higher. Shares of another meme stock, Bed Bath & Beyond, fell below USD 1, leaving the retailer at risk of losing additional funding from hedge fund Hudson Bay Capital Management. The retailer reached an amended agreement with Hudson last week to temporarily lower the stock price threshold to USD 1 until April 3.

(Ankur Banerjee)

Oil up 2% as dollar weakens on small US Fed rate hike

NEW YORK, March 22 (Reuters) – Oil prices rose about 2% to a one-week high on Wednesday as the dollar slid to a six-week low after the US Federal Reserve delivered an expected small rate hike while hinting that it was on the verge of pausing future increases.

Brent crude futures rose USD 1.37, or 1.8%, to settle at USD 76.69 a barrel, while US West Texas Intermediate crude (WTI) ended USD 1.23, or 1.8%, higher at USD 70.90.

That was the highest closes for both crude benchmarks since March 14.

The Fed raised interest rates by a quarter of a percentage point, but indicated it was on the verge of pausing further increases in borrowing costs amid recent turmoil in financial markets spurred by the collapse of two US banks.

“Today’s 25-point rate hike by the Fed provided no surprises but the accompanying language prompted some increase in risk appetite that easily spilled into the oil space,” analysts at energy consulting firm Ritterbusch and Associates told customers in a note.

The US dollar fell to its lowest level since Feb. 2 against a basket of other currencies, supporting oil demand by making crude cheaper for buyers using other currencies.

The oil markets shrugged off the US Energy Information Administration’s (EIA) weekly data that showed crude stockpiles rose 1.1 million barrels last week to a 22-month high.

Analysts in a Reuters poll had forecast a 1.6-million-barrel withdrawal. But the official EIA data showed a smaller build than the 3.3-million-barrel increase reported on Tuesday by the American Petroleum Institute (API), an industry group.

“We just have a lot of crude oil in storage and it’s not going to go away anytime soon,” said Bob Yawger at Mizuho.

US crude stockpiles have grown since December, boosting inventories to their highest since May 2021. Gasoline and distillate inventories, meanwhile, fell last week by more than analysts expected.

WTI and Brent prices last week fell to their lowest since 2021 on concern that banking sector turmoil could trigger a global recession and cut oil demand. An emergency rescue of Credit Suisse Group AG (CSGN) over the weekend helped revive oil prices.

The Organization of the Petroleum Exporting Countries and its allies like Russia, a group known as OPEC+, is likely to stick to its deal on output cuts of 2 million barrels per day (bpd) until the end of the year, despite the plunge in crude prices, three delegates from the producer group told Reuters.

(Additional reporting by Rowena Edwards in London, Shariq Khan in Bengaluru, Sudarshan Varadhan in Singapore and Andrew Hayley in Beijing; Editing by Marguerita Choy and David Gregorio)

Financials lift Australian shares ahead of Fed rate decision

March 22 (Reuters) – Australian shares jumped 1% on Wednesday led by banking stocks, as investors awaited the US Federal Reserve’s interest rate hike decision.

The S&P/ASX 200 index climbed 1.1% to 7,028.50 by 2329 GMT. The benchmark ended 0.8% higher on Tuesday.

Investors would be keenly awaiting the outcome of the Fed’s monetary policy meeting due later in the day, where economists are widely expecting a 25-basis point interest rate hike, according to a Reuters Poll.

In Australia, minutes of the central bank’s last policy meeting on Tuesday suggested it was considering a rate pause in April, if the upcoming retail trade and inflation data provided evidence of cooling demand.

Financials jumped 2%, posting their biggest intraday gain since Jan. 4, with the ‘big four’ lenders rising between 1.7% and 1.8%.

Miners added 0.3%, with heavyweights BHP Group (BHP), Rio Tinto (RIO) and Fortescue Metals Group (FMG) advancing between 0.3% and 1.6%.

Energy stocks tracked oil prices higher to climb 3.4%, their biggest intraday jump since Oct. 20.

Shares of Santos (STO) and Woodside Energy (WDS) jumped 1.8% and 3.2%, respectively.

Tech stocks tracked their Wall Street peers higher to add 0.5%.

ASX-listed shares of Square Inc (SQ2) and Xero Ltd (XRO) jumped 4% and 1%, respectively.

Bucking the trend, local gold stocks plunged 4% and were headed for their worst day since Nov. 3, as bullion prices dropped.

Shares of Newcrest Mining (NCM) and Northern Star Resources (NST) slumped 3.3% and 5.2%, respectively.

Star Entertainment (SGR)fell 0.9%. The casino operator said David Foster would become chairman to replace Ben Heap who is being sued by the country’s corporate regulator, when he retires from the role on March 31.

The New Zealand benchmark S&P/NZX 50 index jumped 0.5% to 11,586.54.

(Reporting by Echha Jain in Bengaluru; Editing by Rashmi Aich)

Gold dips 2% as banking fears recede in run-up to Fed decision

March 21 (Reuters) – Gold dropped about 2% on Tuesday as Treasury yields jumped and easing worries over a banking crisis prompted some investors to cautiously return to riskier assets, while markets await the US Federal Reserve’s next interest rate decision.

Spot gold dipped 2.1% to USD 1,938.19 per ounce by 1:31 p.m. EDT (1731 GMT). US gold futures, too, fell 2.1% to settle at USD 1,941.10. The precious metal hit USD 2,009.59 on Monday, its highest since March 2022, but has since retreated.

“We’re seeing a little bit less risk aversion in the marketplace today… but mainly it’s just heavy profit-taking by the shorter-term futures traders after gold prices hit 12-month highs yesterday,” said Jim Wyckoff, senior analyst at Kitco Metals.

Risk assets, including equities and oil prices, rebounded after the rescue of Credit Suisse calmed nerves about a bigger banking crisis. That made gold, traditionally used a safe asset during financial instability, less attractive.

All eyes are on the Fed policy decision on Wednesday, with some top central bank watchers saying it could pause further rate hikes.

“The surprise to the marketplace would be if the Fed did nothing and that would be probably significantly bullish for the metals markets,” Wyckoff said.

Markets are pricing in an 13.6% chance the Fed will stand pat and an 86.4% likelihood of a 25-basis-point hike, according to the CME FedWatch tool. Higher rates reduce the appeal of non-yielding gold.

“We could see some marginal selling activity below the USD 1,950/oz mark but expect that the combination of strong physical demand and resurgent investor flows should keep (gold) prices from tumbling,” TD Securities said in a note.

Holdings of the largest gold-backed exchange traded fund New York’s SPDR Gold Trust have registered consecutive inflows.

In other metals, spot silver fell 1.2% to USD 22.25 per ounce, platinum dropped 2% to USD 968.73 and palladium slid 1.7% to USD 1,391.14.

(Reporting by Seher Dareen, Swati Verma and Bharat Govind Gautam in Bengaluru; Editing by Tomasz Janowski and Shilpi Majumdar)

Banks spur rebound in European stocks as contagion fears recede

March 21 (Reuters) – European shares rose over 1% on Tuesday, with banking stocks leading the recovery following a raft of measures to stabilise the sector, while investors hoped for less-aggressive moves by the US Federal Reserve at its policy meeting this week.

The pan-European STOXX 600 climbed 1.3%, extending gains after the index sharply recouped intraday losses and closed the session up nearly 1% on Monday.

Lender heavy indexes of Spain and Italy added 2.5% each, outperforming the broader market.

The Fed’s monetary policy meeting ends on Wednesday, with US interest rate futures pricing suggesting that the central bank is likely to hike interest rates by a smaller 25 basis points in the aftermath of the recent banking crisis.

“It’s a very tricky one to call because if they pause you might think that’s good for risk assets, but then simultaneously if you give too many reasons for the pause then that could frighten the horses,” said Chris Beauchamp, chief market analyst at IG Group.

“Fed could send the message that we’re not done yet, but maybe we don’t need to move quite as fast as we have done.”

Europe’s banking index jumped 3.8%, with shares in Swiss banks Credit Suisse (CSGN) rising 7.3% and UBS UBSG.S gaining 12.1%.

Banking stocks globally breathed a sigh of relief on Monday after UBS’s state-backed takeover of the 167-year-old Credit Suisse and coordinated actions by central banks to boost liquidity raised hopes that a wider banking crisis was averted in the near-term.

Meanwhile, European regulators tried to stop the AT1 market rout on Monday saying owners of this type of debt would only suffer losses after shareholders have been wiped out – unlike what happened at Credit Suisse.

Investors were spooked by news that some USD 17 billion worth of AT1 Credit Suisse bonds will be written down to zero as part of the rescue merger but shareholders, who usually rank below bondholders in terms of who gets paid when a company collapses, will receive USD 3.23 billion.

Europe’s banking index is down 12.7% so far in March – the weakest sectoral performer this month – as the collapse of US mid-sized lenders Silicon Valley Bank and Signature Bank as well as troubles at Credit Suisse raised worries that a broader banking crisis was brewing.

Performance of European banks will be resilient albeit divergent as the economic reset kicks in, according to a note by S&P Global, with Credit Suisse being an outlier.

Shares of RWE (RWEG) rose 1.4% after Germany’s biggest utility pledged a higher dividend and more investments to expand its core renewables business.

Thyssenkrupp (TKAG) climbed 4.5% after business daily Handelsblatt reported of interest in its steel business.

(Reporting by Sruthi Shankar and Bansari Mayur Kamdar in Bengaluru; Editing by Sherry Jacob-Phillips, Nivedita Bhattacharjee and Andrea Ricci)

Oil rises 2% in retreat from 15-month low as banking fears subside

HOUSTON, March 21 (Reuters) – Oil prices rose more than 2% on Tuesday, extending a retreat from a 15-month low hit the previous day, as the rescue of Credit Suisse allayed concerns of a banking crisis that would hurt economic growth and cut fuel demand.

Measures to stabilize the banking sector, including a UBS takeover of Credit Suisse and pledges from major central banks to boost liquidity, have calmed fears about the financial system that roiled markets last week.

“Fears of a banking crisis and a recession have eased, brightening the oil demand outlook at least for now,” said Fiona Cincotta, Senior Financial Markets Analyst at City Index.

Brent crude settled up USD 1.53, or 2.1%, at USD 75.32 a barrel, while US West Texas Intermediate (WTI) closed up USD 1.69, or 2.5% to USD 69.33.

On Monday, both benchmarks ended about 1% higher after falling to their lowest since December 2021, with WTI sinking below USD 65 at one point. Last week, they shed more than 10% as the banking crisis deepened.

“A ‘risk back on’ sentiment seems to be coming back to crude, as the latest selloff may very well have been exaggerated liquidation,” said Dennis Kissler, senior vice president of trading at BOK Financial.

The US Federal Reserve started its monetary policy meeting on Tuesday. Markets expect a rate hike of 25 basis points, down from previous expectations of a 50-bp increase. Some top central bank watchers have said the Fed could pause further rate hikes or delay releasing new economic projections.

Wall Street indexes also closed sharply higher on Tuesday as fears over liquidity in the banking sector abated and market participants eyed the Fed.

Meanwhile, US crude oil inventories rose by about 3.3 million barrels last week, according to market sources citing American Petroleum Institute figures. That compared with Reuters estimates for a draw of 1.6 million barrels.

Figures from the US Energy Information Agency are due on Wednesday.

A meeting of ministers from OPEC+, which includes members of the Organization of Petroleum Exporting Countries plus Russia and other allies, is scheduled for April 3. OPEC+ sources told Reuters the drop in prices reflects banking fears rather than supply and demand.

Hedge fund manager Pierre Andurand agreed the latest price drop was speculative and not based on fundamentals. He predicted oil will hit USD 140 a barrel by year end.

The CEO of energy trader Gunvor, Torbjorn Tornqvist, said he expected oil prices to move higher toward year end as rising Chinese demand tightens the market further.

Money managers cut their net long US crude futures and options positions in the week to March 14, the US Commodity Futures Trading Commission (CFTC) said.

(Additional reporting by Alex Lawler in London, Muyu Xu in Singapore; Editing by Marguerita Choy and David Gregorio)

Europe, US reverse bank jitter sell-offs: will Asia follow?

March 20 (Reuters) – A look at the day ahead in Asian markets from Stephen Culp.

Global market skittishness over whether contagion is afoot within the banking sector appears to be waning.

In fact, if European and US markets on Monday are a prologue to Asian markets on Tuesday, investors can look forward to a rebound.

On Monday, the Hang Seng tumbled 2.7% to a three-month low and the Nikkei 225 dropped 1.4%, but the risk-off fog began to lift as the earth rotated around to Europe.

European shares reversed an early sell-off to close up 1% as bank shares rallied, and all three US stock indexes ended higher, led by a 1.2% jump in the blue-chip Dow.

Safe-haven assets – gold and the greenback – were both down about 0.5% at the closing bell.

The S&P Banking index ended the session up 0.6%, but even with Monday’s advance, the index has plunged 21.3% this month.

Last week’s banking bloodbath culminated with the UBS buyout of Credit Suisse after financial heavy hitters in the US threw a USD 30 billion lifeline to First Republic Bank (FRC).

And on Monday, the Federal Deposit Insurance Corporation orchestrated an agreement for a subsidiary of New York Community Bancorp (NYCB) to buy deposits and loans from the freshly shuttered Signature Bank (SBNY).

All of which appears to have calmed fears and brought stability to the market, for now.

As central banks around the world juggle financial sector liquidity needs with their ongoing effort to curb inflation while avoiding recession, with the Federal Reserve due to convene for its two-day monetary policy meeting on Tuesday.

Market expectations regarding the size of the Fed’s next rate hike to be announced on Wednesday – and indeed whether it will raise interest rates at all – are in constant flux.

At last glance, financial markets have priced in a 73.1% likelihood of a 25-basis point increase to the Fed funds target rate and a 26.9% probability of no hike at all, according to CME’s FedWatch tool.

European Central Bank president Christine Lagarde insisted on Monday that the ECB has the tools to contend with financial market turbulence while fighting inflation, just days after announcing a hawkish a 50-basis point policy rate hike.

Here are a few things to watch for on Tuesday:

– Chinese President Xi Jinping and Russian President Vladimir Putin are slated to engage in formal talks regarding Beijing’s proposals for a war resolution

– South Korea releases its February PPI report

– The Federal Reserve convenes for its two-day monetary policy meeting

(Reporting by Stephen Culp; Editing by Josie Kao)

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